Thursday, May 10, 2007

The Intergovernmental Panel on Climate Change (IPCC) released their report on the costs of mitigating climate change. The Economist summarizes their results as follows:

The report says that to stabilise greenhouse-gas concentrations at 550 parts per million (a level most scientists think safeish) would require a price of $20-50 per tonne of carbon by 2020-30. That The IPCC’s economic models reckon, on average, that if the world adopted such a price the global economy would be 1.3% smaller than it otherwise would have been by 2050; or, put another way, global economic growth would be 0.1% a year lower than it otherwise would have been.

That seems quite reasonable and worth the cost.

The report looks at how much CO2 emissions could be reduced by 2030 with various CO2 emission prices. At $0 per ton, emissions can be reduced by approximately 6 tons or 8.5%, at $20 13 tons (19.5%), at $50 19.5 tons (29%) and at $100 23.5 tons (34.5%).

To put this price in perspective, each dollar per ton translates to 1¢ per gallon of gasoline (as a gallon emits 20 lbs of CO2), .1¢ per kWh of coal powered electricity (as each kWh produces 2.1 lbs of CO2) or .065¢ per kWh of natural gas powered electricity (1.3 lbs of CO2 per kWh). A $20 price would translate to 20¢ per gallon of gasoline, 1¢ per kWh of coal electricity and .65¢ per kWh of natural gas electricity.

The report also looks at what sector the savings would come from with various prices as seen in the chart (click for larger version).

Interesting points:1) The largest potential savings are in buildings.2) Transportation savings account for only 8% to 14% of total savings.3) Raising the price of carbon emissions has little impact on reducing emissions from transportation and buildings, but it has a large impact on industry, agriculture and forestry.

Based on this report, I think it makes sense to have a carbon tax of $20-$50 a ton that is gradually implemented over many years. A cap and trade system could also be used if a tax is not possible politically.